Opposition calls for inquiry into asset sale

The NSW Coalition has called for an investigation into the cost of selling the state’s $5.3 billion electricity assets.

The Keneally government expects to spend $200 million on bankers, lawyers and advisers for the sale, which is equal to 3.8 per cent of the gross proceeds.

Shadow treasurer
Mike Baird
said the cost was almost three times that of major privatisations conducted by the Queensland, Victorian and federal governments in the past 15 years.

He has written to NSW Auditor General
Peter Achterstraat
to ask for a detailed investigation of why the fees were so high.

According to a research report prepared for Mr Baird, other privatisations including Queensland’s current asset sale program, the three separate Telstra sales, Sydney Airport and Victoria’s energy assets involved transaction costs of between 0.8 per cent and 1.3 per cent of gross proceeds.

“A basic analysis of comparable transactions suggests this has been one of the most expensive transactions in recent history," he said.

Mr Achterstraat released a preliminary review of the electricity sale yesterday but it did not include any analysis of the transaction costs. He said he would take into account the costs when evaluating the net proceeds from the sale as part of a full report to be released later this year.

Treasurer
Eric Roozendaal
said he welcomed any scrutiny of the deal, including the transaction costs.

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“It is a very complex transaction, involving five separate state-owned corporations and complex contracts so there’s certainly been a lot of costs involved in this process but I’m very happy for the Auditor General to review all of the transaction costs," he said.

The sale process ran for three years and involved a complicated transaction model, which changed over time. An army of advisers was appointed over that period, including investment banks Lazard and Credit Suisse, accounting firms Ernst & Young and KPMG, legal firm Baker & McKenzie and public relations firms Cosway Australia and Gavin Anderson.

Mr Baird said Queensland’s asset sale program was also complex and cost half as much. “There were multiple deals across multiple industries involving multiple international roadshows," he said.

“I’m not denying the NSW electricity sale was complex but I think Queensland proves that if you have a stream-lined process that’s disciplined and focused, you can deal with the complexities."

The NSW government sold its three energy retailers – Energy Australia, Integral and Country Energy – as well as the electricity trading rights to four of its power stations and three development sites to TRUenergy and Origin Energy in December last year.

At the time, it said it was still in negotiations to sell the remaining electricity trading rights and development sites, worth up to $2.5 billion, according to analysts.

Following a public backlash against the sale and a high-profile parliamentary inquiry, the government abandoned the second part of the sale last month. Premier
Kristina Keneally
said there would be no further privatisation of the electricity sector under a Labor government.

The decision resulted in a jump in the transaction costs as a percentage of total gross proceeds and meant costs blew out even compared with the government’s expectations.

An internal cabinet document, published last year, showed the government “anticipated transaction costs will account for 1 to 2 per cent of total proceeds".